Port Finance
  • šŸ“ŠIntroduction to Port Finance
  • šŸ“–Deposit and withdrawal
  • šŸ“–Borrow
  • šŸ’±Variable Rate Lending
    • Terminologies
    • Protocol Math
    • Risks & Parameters
    • Fees
    • Interest Rate Curve
    • Liquidation
  • šŸ’°Fixed Rate Lending
    • Principal Tokens and Yield Tokens
    • Arbitrage Opportunities
    • Principal Token Trading Venues
  • šŸ”Security
    • Bug Bounty
  • šŸ‘Øā€šŸ’»Developers
    • Developer Resources
    • Interacting with Port Finance via Rust
  • šŸŖ™Tokenomics
    • Tokenomics
  • šŸ”—Community Links
    • Community Links
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  1. Variable Rate Lending

Interest Rate Curve

Port Finance uses Aave's interest rate model where the rate is determined by the utilization of the protocol. It employs a two segment interest rate model, where the second slope is steeper than the first to incentivize more depositing when utilization ratio is high.

Mathematically, we use the following interest rate model:

U<Uoptimal:Rcurr=R0+UtUoptimalRslope1U < U_{optimal}: R_{curr} = R_{0} + \frac{U_{t}}{U_{optimal}} R_{slope1} U<Uoptimal​:Rcurr​=R0​+Uoptimal​Ut​​Rslope1​

U≄Uoptimal:Rt=R0+Rslope1+Utāˆ’Uoptimal1āˆ’UoptimalRslope2U \geq U_{optimal}: R_{t} = R_{0} + R_{slope1} + \frac{U_{t} - U_{optimal}}{1 - U_{optimal}} R_{slope2}U≄Uoptimal​:Rt​=R0​+Rslope1​+1āˆ’Uoptimal​Utā€‹āˆ’Uoptimal​​Rslope2​

When U < U Optimal, the rate increases slowly with utilization.

When U >= U Optimal the borrow interest rate increases sharply to incentivizes more deposit and avoid liquidity risk.

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Last updated 3 years ago

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